The Homebuyer Tax Credit Is Officially Extended And Expanded

Realtors and
homebuilders can breathe a sigh of relief. As many had
anticipated, the Senate extended and expanded the homebuyer tax
credit. The House will vote on it today, but now it really is a
done deal.

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AP: Buying a home is about to get cheaper for a whole new crop of
homebuyers — $6,500 cheaper.

First-time homebuyers have been getting tax credits of up to
$8,000 since January as part of the economic stimulus package
enacted earlier this year. But with the program scheduled to
expire at the end of November, the Senate voted Wednesday to
extend and expand the tax credit to include buyers who already
own homes. The House could vote on the bill as early as Thursday.

Buyers who have owned their current homes at least five years
would be eligible for tax credits of up to $6,500. First-time
homebuyers — or anyone who hasn't owned a home in the last three
years — would still get up to $8,000. To qualify, buyers in both
groups have to sign a purchase agreement by April 30, 2010, and
close by June 30.

"This is probably the last extension," said Sen. Johnny Isakson,
D-Ga., a former real estate executive who championed the credits.

The homebuyers tax credit is one of two tax breaks totaling more
than $21 billion that the Senate included in a bill extending
unemployment benefits for those without a job for more than a
year. The other would let companies now losing money recoup taxes
they paid on profits earned in the previous five years.

"We are still in a world of economic hurt, and Congress must
continue to act boldly and creatively," said Sen. Max Baucus,
D-Mont., chairman of the Senate Finance Committee. "With the
right mix of tax breaks and investments we will get through this
recession and get folks working again."

The real estate industry has been pushing to extend and expand
the housing tax credit. About 1.4 million first-time homebuyers
have qualified for the credit through August. The National
Association of Realtors estimates that 350,000 of them would not
have purchased their homes without the credit.

Extending and expanding the tax credit for homebuyers is
projected to cost the government about $10.8 billion in lost
taxes. While the measure passed the Senate by a 98-0 vote, Sen.
Kit Bond, R-Mo., questioned its efficiency in stimulating home
sales.

"For the vast majority of cases, the homebuyer tax credit
amounted to a free gift since it did not affect their decision to
purchase a home," Bond said. "And for the small minority of
buyers whose decision was directly caused by the credit, this
raises the question of whether we are subsidizing buyers who may
not have been able to afford buying a home in the first place."

The credit is available for the purchase of principal homes
costing $800,000 or less, meaning vacation homes are ineligible.
The credit would be phased out for individuals with annual
incomes above $125,000 and for joint filers with incomes above
$225,000.

The credit would be extended an additional year, until June 30,
2011, for members of the military serving outside the United
States for at least 90 days.

Expanding the tax credit for money-losing companies is projected
to cost $10.4 billion.

The business tax break would allow money-losing companies to use
current losses to offset taxable profits earned in the previous
five years, giving them refunds of taxes paid in those years.
Under current law, businesses with annual gross receipts of more
than $15 million can claim losses back only two years.

The tax break would help industries suffering losses in 2008 or
2009, including retailers, homebuilders and newspapers. Congress
included a scaled-back version of the tax break — for companies
with revenues of $15 million or less — in the economic recovery
package enacted in February. The new tax break would be available
to companies of any size, providing a quick source of cash.

The U.S Chamber of Commerce has been a big backer of the tax
break for money-losing companies.

"It frees up capital that they can use to maintain jobs and
potentially even hire new people as the economy returns," said
Caroline Harris, senior tax counsel for the U.S. Chamber of
Commerce.

The tax breaks would be paid for largely by delaying a tax break
for multinational companies that pay foreign taxes. It was passed
in 2004 and originally was to have taken effect this year, but
would now be delayed until 2018.